Is There Safe Harbor From The Financial Crisis In Canadian Dollar Crosses

Conditions have deteriorated dramatically in the financial markets this week and the currency market has reflected a general sense of confusion. Is there protection to be had in Canadian dollar positions? See what the DailyFX Analysts are looking at below and decide:

Senior Currency Strategist - Jamie Saettele

My picks: USDCAD Short against 1.0806, target
Expertise: 1.0050
Average Time Frame of Trades: 1 Month

There is no change to my recent USDCAD analysis. “The USDCAD reversed at a Fibonacci confluence (61.8% ext. of the .9055-1.0378 advance and 61.8% retrace of the decline from 1.1875 to .9055). We have been expecting an important top to form. That top could be in place just above 1.08.”

Currency Strategist - John Kicklighter

My picks: Pending AUDCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week

The world's financial markets hit a new gear. There is some confusion surrounding which currency is in the direct path of the crunch and those that will feeling the lagging impact. So far, the market has been fully focused on the US dollar and its biggest trade partners. However, one direct link to the swell of risk aversion so far has been the carry trade and its high and low-yielding components. In a time of panic, it stands to reason (fundamentally) that traders will vie for liquidity and aviod risk at all costs. While there has already been a considerable decline in the carry so far, it almost certainly isn't at the point where it reflects current market conditions.

In this knowledge, I'm looking to go short a high yielder which has considerable exposure to the financail problems in its economy: the Australian dollar. Against that, the Canadian dollar is backed by an economy that has shown minimal fallout from the credit problems, still has a strong domestic economy and has comparatively strong rate outlook (the RBA has essentially opened the gates to steady policy easing). Technically, a short AUDCAD position holds to the dominate trend from the beginning of August. In looking for a setup with good risk/reward, there are two scenarios that are reasonable. A more aggressive approach would look for a short when spot closes in on 0.86 (the falling trend) and a stop is place reasonably above this level to account for whips that are common in such consistent trends. More cautious would be to wait for the rising trendline from the June 2006 lows to give way. A longer-term trade to the short-side would be difficult to maintain as recent historical lows are near and therefore targets will be more slowly approached (tying up capital for a longer time). Also, the break of the falling trend from August should be considered a possibility in these market conditions. Should a daily bar close above 0.86 (0.87 for a cautious approach), a reversal move good be good for small percentage of the overall trend (wouldn't look for much more considering the larger fundamentals).

Currency Strategist - Terri Belkas

My picks: Long USD/CAD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-3 Days

While my longer-term dollar bias is bearish, I like USD/CAD to the upside right now. We've seen the pair hold to a range of approximately 1.06 - 1.08, and since USD/CAD has a tendency to hold within ranges for long periods of time, I think this may be something worth trading. Furthermore, we've seen that the markets are responding positively to the Federal Reserve's massive $180 billion emergency liquidity injection, as US stock market futures are now positive. Given the extent of the dollar's decline yesterday, I think we could see a bit of a bounce today. Stops should be place below the recent spike lows of 1.0577, while 1.0750 (near the top of the range) may serve as a good target.

Currency Analyst - Ilya Spivak

My picks: Short USDCAD below 1.0550
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

The broad, long term USDCAD trend has favored the bulls since price action has broken above resistance at a downward sloping trend line in place since October 2002 in early August. However, dollar strength has begun a corrective retracement offering a short-term bearish opportunity. Price action has currently found support at 1.0550, the the 23.6% Fibonacci retracement of the 07/22-08/12 rally. Enter short on a daily close below this level, targeting the 38.2% Fib level at 1.0438. Set stop loss at 106.06.

Currency Analyst - John Rivera

My picks: Long USDCAD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-2 Days

The USDCAD has traded with a tight range for the past few weeks between bollinger band reistance and the 20 DAy SMA. The recent buliish loonie data has failed to push the pair below support and it looks like the time to buy at the bottom of the range, as it looks to rise toward resistance at 1.0743.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.